In a report delivered to the Minister of Finance, the Ontario Lottery and Gaming Corporation (OLG) has outlined a proposal to modernize lottery and gaming in Ontario. Modernizing Lottery and Gaming in Ontario: Advice to Government (PDF) is the result of a strategic business review that took place over the course of 2011. At the request of the government, OLG conducted a review of lottery distribution and land-based gaming facilities in Ontario. The review consisted of stakeholder consultations, research and extensive business analysis.

A number of issues made a compelling case for change:

Lottery and gaming are played by a majority of Ontarians (Last year, about 8 million Ontario adults played the lottery and 2.7 million visited an OLG gaming site.)

OLG currently contributes just under $2.0 billion to the Ontario government to support key priorities like health care and education.

The current model is unsustainable due to a number of factors including offshore gaming websites, declining border traffic and limited lottery purchasing options.

Continued revenue to government is at risk without reform to the lottery and gaming industry.

Revenues paid to the province are in decline.

If no action is taken, OLG will need to spend $1 billion in public capital just to update its current service.

An estimated $400 million is currently spent by Ontarians on offshore gambling websites.

There is interest in improved or expanded sales options for lottery and gaming in urban Ontario markets.

Some lottery terminals and gaming facilities are in locations that are not convenient to customers.

Many Ontarians frequent retail locations like supermarkets, big box stores and large retail locations where lottery terminals are not conveniently located.

Early expansion focused on properties near the U.S. but visits to Ontario from the U.S. have declined by 70 percent (23 million border crossings in 2002 to 7 million in 2011).

Slot machine facilities are currently tied to racetracks, which limits options for gaming locations and costs the government $345 million annually

Since lottery was introduced in 1975, technology has vastly improved and OLG has not kept pace. It’s a paper-based system that could be more efficient.

OLG has the opportunity to significantly improve its contribution to the government—by $1.3 billion annually in 2017.

“Our plan will help create some 2,300 net new industry jobs and about 4,000 service sector jobs. It will improve how lottery and gaming are delivered in Ontario, and expand our gold standard approach to Responsible Gambling,” said OLG Chair Paul Godfrey. “As our plan is implemented, it could help launch some $3 billion in new private capital investment in the Ontario economy.”

“The OLG report has three key recommendations: become more customer-focused; expand the regulated private sector delivery of lottery and gaming; and renew OLG’s role to concentrate on the oversight of lottery and gaming,” said OLG President and CEO, Rod Phillips . “As these proposals are implemented over the next six years, the government could benefit from an additional $4.6 billion in revenue for key priorities.

Key Report Recommendations

The report recommends reforms to Ontario’s gaming industry, all of which are subject to government approval. The report includes three recommendations:

OLG would identify distinct zones where existing or new gaming sites (with municipal approval) would be permitted.

In order to be able to change, move or create new sites, OLG should be able to expand slot facilities beyond horseracing racetracks. This would mean ending payments of approximately $345 million annually to racetracks. OLG does plan to continue offering slots at some racetracks where there is customer interest.

Lottery terminals and gaming sites should be where customers are—the supply should be near the demand.

Subject to municipal approval, allow new gaming sites in convenient locations where there is customer interest and, tourism potential.

Close or relocate facilities that are underperforming. Some could move to locations within their regions that are closer to customers.

Allow up to one new casino in the GTA, subject to an OLG business case and municipal approval.

To improve the ability to offer a mix of games at sites, implement a consistent fee model for host municipalities to allow OLG to place gaming sites where there is customer interest.

Expand Regulated Private Sector Delivery of Lottery and Gaming

To modernize both lottery and gaming options in Ontario, OLG would expand the engagement of the private sector to build and run the day-to-day operation of existing and new sites and to develop new technology and games for lottery terminals.

This will mean some $3 billion in new private capital investment—a benefit to the Ontario economy.

In addition to 2,300 net new jobs in the lottery and gaming industry, this initiative would help create an estimated 4,000 service sector jobs in the hospitality: hotel, restaurants, entertainment and retail industries.

The moving of 6,000 gaming positions to private sector operators who will manage all OLG sites. Currently, 60% of gaming employees in Ontario work for private operators – the resort casinos which are owned and overseen by OLG. In the next 12-18 months, we anticipate 100 % will be employed by the private sector.

OLG would maintain strict control and oversight of the business—including maintaining the integrity of lottery games.

Regulated private sector providers would be responsible for funding, building or improving new and existing sites (upon recommendation by OLG with approval by the Minister and the host municipality).

Renew OLG’s Role In Oversight of Lottery and Gaming

OLG would continue to maintain direct responsibility for all critical decisions related to the operation of lottery and gaming.

OLG would continue to manage the lottery and gaming market and provide net profit to the government of Ontario—and if this proposal is accepted, increase that contribution.

OLG will become a smaller organization focused on market management, the oversight of private operators and responsible gambling.

Ontario will continue to be the North American leader in problem gambling programming. Ontario dedicates over $50 million dollars to the prevention and treatment of problem gambling – the highest funding level on the continent.

OLG will ensure that responsible gambling resource centres and facial recognition technology are established at all gaming sites to mitigate the risk of problem gambling.

OLG recommends the expansion of research and treatment support for problem gambling.

OLG would also commit to increasing environmental practices in any modernization of lottery and gaming options.